US Senate puts $40,000 cap on price of electric cars that qualify for EV tax credit ahead of reform
August 11, 2021
The US Senate has voted to approve a non-binding resolution setting a $40,000 threshold on the price of electric cars that would be eligible for a $7,500 federal tax credit. However, the measure has just passed as the Democrats are working to reform the EV incentive program.
As part of the new federal budget, the US Senate approved an amendment introduced by Senator Deb Fischer (R-NE) to introduce a limit on the price of electric cars eligible to the $7,500 federal tax credit. Only electric cars that cost less than $40,000 would be eligible.
The Senate approved the amendment 51-48, but it would still need to survive the House of Representatives. The timing of the effort to limit access to the EV incentive is interesting since the Biden administration has made clear that they plan to reform the program.
Currently, the leading effort to reform the federal EV incentive is the Clean Energy for America Act, which would increase the incentive to up to $12,500 and remove the threshold of 200,000 EVs delivered by manufacturers. It would give back access to the incentive to Tesla and GM electric car buyers.
The new proposal would also add a price limit on the new electric vehicles eligible for the incentive, but it’s currently much higher than the one introduced by Fischer at $80,000. The bill still has to go through the legislative process, and it’s likely to change by the time it makes it into law.
This is strange timing to introduce this limit, considering the Biden administration has made it clear that the program will be reformed by the end of the year. That said, it has always been strange that there was no price limit on the incentive, which is the case in most other countries.
I think $40,000 is a bit low while $80,000 is a bit high. Something around $50,000-$60,000 would probably make the most sense, and hopefully, they come to such a compromise.
As for the limit on income, I think that’s not ideal, especially considering the incentive is currently taking the reform of a tax credit.
The current form of the program also plans to make it a point-of-sale incentive, which should have a much greater impact. After all, the program’s goal is to incentivize people to buy electric vehicles over gas-powered vehicles and to reflect their benefits (including financial benefits) on the environment over their more polluting counterparts.